Diversey Holdings Shares Gain 15.3% on Q4 Earnings Beat & Outlook

Diversey Holdings Ltd. (NASDAQ: DSEY) reported stronger-than-expected Q4 earnings topping estimates, while revenues were slightly short of street expectations. Pricing increases led to improved margins despite a challenging environment with significant raw material and freight cost increases.

Despite mixed results, shares of the American provider of cleaning and hygiene products in the hospitality, healthcare, food and beverage, and various sectors gained 15.3% on March 9, after the company provided an optimistic long-term profitability outlook.

Q4 Performance

Adjusted earnings of $0.16 per share beat analysts’ expectations of $0.13 per share. The company reported earnings of $0.11 per share for the prior-year period.

However, revenues jumped 0.7% year-over-year to $672.4 million but were modestly short of consensus estimates of $677.05 million. The increase in revenues reflects 14% growth in Food & Beverage segment offset by a 3.5% decline in the Institutional segment.

Positively, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin improved 190 basis points year-over-year to 16.3% despite a challenging environment.

FY2022 and Positive Long-Term Outlook

Based on the expected post-COVID recovery, strong pricing, accelerating new business, and M&A, management issued financial guidance for FY2022.

FY22 revenues are forecast to grow by a high single-digit percent year-over-year to be around $2.62 billion, versus the consensus estimate of $2.82 billion.

The company forecasts 2022-adjusted EBITDA in the range of $380 million to $420 million.

Regarding the ongoing Russia – Ukraine conflict, Diversey expects related challenges to persist through the first half of 2022.

In the long-term, Diversey remains confident that it is well-positioned to maintain its targeted goal of double-digit adjusted EBITDA growth. The growth will be driven by sustained price increases, recent acquisitions, the new plant in the United States, as well as the continued growth of its new business.

CEO Comments

Diversey CEO, Phil Wieland, stated, “As we head into 2022, significant global macro challenges remain, but we are confident that Diversey is well positioned to deliver annual double-digit adjusted EBITDA percentage growth long-term once the current challenges recede during 2022.”

Analysts Recommendation

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 5 Buys and 2 Holds. The average Diversey Holdings stock forecast of $15.46 implies 83.35% upside potential to current levels.

TipRanks’ Smart Score

DSEY scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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